5 Key Differences Between Reverse Mortgage Loan and Loan Against Property

When it comes to financial planning, especially in the later stages of your life, you come across two options – Reverse Mortgage Loan and Loan Against Property. Both options allow you to access quick funds using your property as collateral. But they cater to different features and end-use based on your age. Read on to understand the difference between a Reverse Mortgage Loan and a Loan Against Property to decide which one to choose.

What is Reverse Mortgage Loan?

Reverse Mortgage Loan is a product designed to aid senior citizens (60 years and above) owing a home with their financial needs. If you are a senior citizen looking for a regular source of income or cover medical expenses, you can opt for a Reverse Mortgage Loan. Based on your home’s value, interest rate, and other aspects based on lender, you can avail the loan amount as regular payments or lump sum amount.

To avail Reverse Mortgage Loan, you must be a sole or joint owner of the home. The ownership of the home remains with you during the loan tenure and is gradually transferred to the lender at the end of the loan tenure.

What is a Loan Against Property?

Loan Against Property (LAP) is offered to you against your property (commercial or residential) as collateral. Unlike Reverse Mortgage Loan, there is no restriction on the end use and age limit to avail a Loan Against Property. You can use it for your business, weddings, home renovations, medical emergencies, etc.

Loan Against Property is provided as a lump sum amount that you can repay as regular EMIs every month for a fixed tenure. If you fail to repay the loan amount, there is a risk of losing the property as the lender may seize your property to recover funds.

Difference Between Reverse Mortgage Loan and Loan Against Property

The major difference between reverse mortgage loan and loan against property is provided below:

Parameters	Reverse Mortgage Loan	Loan Against Property
Age	Limited to senior citizens (60 years or older).	No restriction on age.
Loan Disbursal	Lump sum amount or monthly payments.	Lump sum amount.
Repayment	Regular payment is not required. The lender sells the home at the end of tenure. You or your legal heirs can buy the home back after repaying the loan amount.	You need to make regular payments for fixed tenure to avoid property loss.
End Use	To supplement retirement income and cover medical expenses only.	No restriction on end use.
Property Ownership	Ownership is retained, but property taxes, insurance, and maintenance are to be incurred by the owner.	Ownership is retained but acts as collateral. Timely payment needs to be ensured to prevent seize of property.

 

Reverse Mortgage Loan vs Loan Against Property: Which One to Choose?

Choosing between Reverse Mortgage Loan and Loan Against Property is based your current situation and financial goals. If you are a senior citizen and looking for a regular source of income without selling the home and repayment obligations, Reverse Mortgage Loan might be suitable for you. On the other hand, if you are looking for flexibility and comfortable with regular payments, a Loan Against property may be a better fit.

Also Read - Decoding the concept of Loan Against Property (LAP)

To Conclude

Reverse Mortgage Loan and Loan Against Property both allow homeowners to access quick funds in financial emergencies. However, which one to choose depends on your age, end use and financial goals. It is advisable to consult financial advisor to determine the right choice for your based on your circumstances.

If you are looking for a Loan Against Property, choose Poonawalla Fincorp with minimal documentation and instant disbursal of funds.

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Loan Against Property disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply